We have established an efficient system for differentiation, expansion and isolation of hepatic progenitor cells from mouse embryonic stem (ES) cells and evaluated their capacity to repopulate the diseased liver upon transplantation using a MUP-uPA/SCID mouse model of liver injury. The FACS-purified hepatic progenitor cells developed into mature hepatocytes without evidence of cell fusion and participated in rebuilding normal parenchyma with reconstitution of liver-specific zonal gradients of hepatic function. The ES cell-derived hepatocytes were responsive to normal growth regulation and proliferated at the same rate as the host hepatocytes after an additional growth stimulus from CCl4-induced liver injury. The transplanted cells also differentiated into biliary epithelial cells. These data demonstrate that a highly enriched population of committed hepatocyte precursors can be generated from mouse ES cells in vitro for effective cell replacement therapy. We have also developed a protocol for efficient differentiation of human ES cells toward early stages of hepatocytic differentiation based on current strategies. By employing our protocol, up to 80% of ES cells were found to express high levels of albumin and exhibited several other known hepatic functions including accumulation of glycogen. In addition, we have now established a protocol for generating iPSCs from human fibroblasts by transduction with lentiviruses that independently expressed POU domain class 5 transcription factor 1 (OCT3/4) SRY-box containing gene 2, (SOX2), NANOG homeobox (NANOG), and Lin-28 homolog (LN28). These iPSCs recapitulate both the hepatocytic differentiation and morphological changes seen with the human ES cells. Our current research plans are focused on: (i) detailed biochemical and genomics characterization of the in vitro differentiation of the human ES and iPSCs into hepatocytes including in vivo transplantation (into 1-day old mice , MUP-uPA/SCID mice) to formally test the ability to give rise to differentiated hepatocytes;(ii) development of a protocol for differentiation of ES cells and iPSCs into cholangiocytes based on three dimensional culture conditions that we have developed for cholangiocytic differentiations of adult liver stem cells.